Summary

Given the enormity of the economic, business and social-welfare
problems confronting Japan, some pundits could not resist speculating
that the Liberal Democratic Party and its governing partners, the New
Komeito and the New Conservative Party, would take a royal drubbing
in the June 25 lower house elections. The proverbial last straw
that would cause voters to abandon the ruling parties in droves, they
proposed, was none other than the substantively weak, gaffe-prone
Prime Minister Yoshiro Mori, who had been propelled to the nation's
highest elected office by LDP elders in need of a loyalist to warm
the seat vacated by the gravely ill Keizo Obuchi. To the surprise of
these observers, not only did the coalition clinch a 271-seat
absolute majority in the 480-member House of Representatives, but the
three parties also quickly united behind Mr. Mori, ensuring his easy
reelection as premier.

The election results were hardly a rousing endorsement of Mr. Mori
and his triparty administration, however. The Liberal Democrats lost
the simple majority that they had had in the lower house before it
was dissolved for the poll. The ranks of its partners also were
thinned by more than a third. The opposition parties, in contrast,
boosted their Diet representation substantially  but not by
enough to unseat the coalition.

Voters seemed to be saying that even though they continued to lose
faith in the LDP's leadership, they were not ready to entrust the
running of the government to an opposition led by the Democratic
Party of Japan. Mr. Mori's win also may be viewed as a victory by
default. The prime minister was able to keep his job primarily
because he was a less-divisive figure than any potential LDP
contender. Furthermore, Mr. Mori is needed to preside over the late
July summit on Okinawa of the leaders of the Group of Seven
industrial nations plus Russia.

Most experts believe that the next major turning point for the LDP
and its partners will be the July 2001 upper house elections 
although almost anything could happen in the meantime in Japan's
fluid political world. Mr. Mori already faces some known challenges
in the near term. In addition to getting the economy on a
self-sustaining recovery track, the prime minister must navigate the
mine field created by a bribery scandal involving a former
Construction minister, the collapse of retailer Sogo Co., Ltd. and
the January 2001 implementation of a sweeping bureaucratic
reorganization.

In the end, Mr. Mori may be forced out of office sooner rather
than later, especially if further revelations implicate senior LDP
members in the Ministry of Construction scandal. Moreover, the LDP
leadership could be threatened by instability from within the party
that is fueled by generational differences as well as by the clash of
traditional interest group agendas, a growing split among key
constituencies and old-fashion power plays. However, barring the
emergence of a unified political opposition with a well-conceived
policy platform, the Liberal Democrats will deal with these
potentially transformational forces by making only incremental
changes in policy and political behavior. Then again, muddling
through is how the LDP has managed to hang onto power for 40-plus
years.

Elections Disappoint
Proponents Of Change

The June 25 elections for the Diet's House of Representatives
were hyped by the media as representing an important turning point in
postwar Japanese politics. If nothing else, they were the first
opportunity for voters to pass judgment on the nation's leadership in
almost four years  and much had occurred during that time. For
starters, the government had seemed to change with the seasons.
Between November 1996 and June 2000, three successive prime ministers
had presided over five different administrations, each of which was
composed of an assortment of political parties that ran the
ideological gamut from the left-leaning, pacifist Social Democratic
Party of Japan to the ultraconservative, nationalistic Liberal
Party.1

The frequency of these political
realignments and the fact that they appeared to be driven more by the
Liberal Democratic Party's desire to controlthe Diet than by
policy-related or ideological concerns have eroded public trust in
politicians and the political system. Surveys indicate that about
half of all eligible voters are not affiliated with a particular
party. The declining turnout for national elections also has been
attributed to a growing perception among people that their votes do
not matter. Politicians will do whatever is necessary to remain in
power, regardless of public sentiments, survey respondents have
lamented.2

Disaffection Builds

An electorate that previously had been
largely apathetic defied conventional wisdom in the July 1998 upper
house poll by delivering a crushing defeat to LDP
candidates.3 Fed up with the ruling party's
dithering approach to resolving the country's economic problems and
its inability to move decisively to put right a banking industry on
the verge of collapse, voters expressed their outrage via the ballot
box. Many experts regarded this unanticipated outcome as a seminal
event in Japan's postwar democracy. In this view, voters for all
intents and purposes had served notice that they no longer would
assume that the LDP knew what was best for Japan simply because it
had been in power for 40 years. Henceforth, these experts concluded,
people would hold the Liberal Democratic powers-that-be accountable
for the nation's economic and political
welfare.4 The impetus for the sweeping
reforms that economists on both sides of the Pacific have argued are
imperative for Japan's recovery would come from the grass roots
 or so the results of the upper house elections seemed to
indicate.

Thus, notwithstanding preelection surveys suggesting a
low-to-moderate turnout, some commentators  perhaps caught up
in wishful thinking  predicted an even stronger anti-LDP
backlash in the late June lower house contests. The triparty
government of Prime Minister Yoshiro Mori, composed of the LDP, the
New Komeito and the New Conservative Party, was extremely unpopular
with the typical Japanese. Voters apparently viewed the coalition as
simply an opportunistic union of the three parties aimed at
dominating both Diet houses (see Table 1).

Table 1: Party Membership in the Diet, July 5, 2000

LowerHouse

UpperHouse

Ruling Parties

aa Liberal Democratic Party

232

106

aa New Komeito

31

24

aa NewConservative
Party

7

6

Opposition Parties

aa Democratic Party of Japan

129

58

aa Japan Communist Party

23

20

aa Liberal Party

22

5

aa Social Democratic Party of Japan

19

13

aa Independents/Minor Parties

16

20

Vacancies

1

0

Total

480

252

Source: Kyodo News Wire Service, July 5,
2000.

Mr. Mori essentially had inherited this governing arrangement from
Prime Minister Keizo Obuchi. In October 1999, he had brought the
centrist, Buddhist-backed New Komeito into an alliance that joined
the conservative LDP with the even more right-wing Liberal Party (see
JEI Report No. 39B,
October 15, 1999). The Liberal Party's early April decision
to leave the coalition for both political and policy-related reasons
further highlighted the flimsiness of the triparty accord. The fact
that 11 of Liberal Party chief Ichiro Ozawa's followers chose to
remain aligned as the New Conservative Party made these changes at
the highest reaches of government seem like nothing more than a game
of musical chairs (see JEI Report
No. 14B, April 7, 2000).

Even more disturbing to voters, however, was
the fact that the incessant political maneuvering and
alliance-building had not necessarily produced policies that
effectively addressed Japan's still-staggering economic problems.
Growth remained uncertain, unemployment was at record levels and, in
an effort to jump-start the economy, Tokyo had saddled the nation
with a public debt exceeding its gross domestic product. Public
opinion surveys over the past three years have indicated a growing
loss of faith in the LDP-led government's ability to address the
country's array of economic and social needs. Even formerly stalwart
party supporters in the business community have become ever more
disillusioned with Liberal Democratic policy prescriptions that have
failed to lift the recessionary pall. Declining campaign
contributions and a loosening of the postwar compact between the
public and the private sectors are two signs of this
rift.5

Despite these disturbing trends, Liberal
Democratic elders in early April appeared to thumb their noses at an
electorate clearly disenchanted with their power games when they
selected Mr. Obuchi's successor using the same closed-door
deliberations that have come to be associated with the corrupt side
of LDP politics.6 Mr. Mori, a former LDP
secretary general known more for his behind-the-scenes skills than
for his policy acumen, got the nod from ruling party doyens even
though he clearly lacks the political will, the leadership abilities
and the substantive background needed to tackle the acute problems
confronting Japan (see JEI Report No.
15B, April 14, 2000).

As if to fulfill his critics' worst expectations, Mr. Mori
stumbled badly soon after becoming prime minister by making several
politically inflammatory remarks. Speaking to a group of nationalist
LDP lawmakers, Mr. Mori described Japan as a "divine nation centering
on the emperor"  a statement that precipitated a fire storm of
criticism from the political opposition, the coalition parties and
even LDP cabinet members. To a nation that holds sacrosanct the
pacifist principles embodied in its constitution, this comment, which
seemed to venerate the beliefs held by Japan's pre-1945 militarist
government to justify its brutal conquest of Asia, was callous, to
say the least; some opinion shapers decried Mr. Mori's words as
blasphemous.

Even more galling to many observers was the prime minister's
refusal to retract the "divine nation" comment. Just two weeks later,
moreover, he made yet another controversial, war-era reference. LDP
candidates for the lower house elections became so worried that Mr.
Mori would commit still more faux pas that would hurt their chances
that many requested that the prime minister not make the customary
campaign appearances in their districts. Reflecting the worst fears
of ruling party politicians, in the days leading up to the late June
elections, approval ratings for Mr. Mori skidded into the low teens.
Support for the triparty government was not much higher.

Qualified Victory

Convinced that the LDP and its partners
would be trounced at the polls, some political experts found
themselves scrambling for answers when voters once again proved their
predictions wrong. The coalition parties emerged victorious 
albeit barely  clinching a 271-seat absolute majority in the
480-member House of Representatives.7 But
the elections hardly were a stunning victory for Mr. Mori and his
government. While the LDP secured 233 seats, surpassing the 229-seat
goal set by party strategists (seeJEI
Report No. 22B, June 9, 2000), the legislative
ranks of the biggest party were thinned by 38 (see Table 2).
This was the most substantial shift in power since the Liberal
Democrats lost 36 seats in the 1983 lower house elections after a
court convicted former Prime Minister Kakuei Tanaka for his actions
in the 1976 Lockheed Corp. bribery scandal.

Table 2: Outcome of the June 25 Lower House
Elections

Party

Total[1]

Single-Seat Constituencies

Proporational Representation

Seats Held
in Last Diet[2]

Liberal Democratic Party

233

177

56

271

New Komeito

31

7

24

42

New Conservative Party

7

7

0

18

aaa
Democratic Party of Japan

aaa
127

aaa
80

aaa
47

aaa
95

Liberal Party

22

4

18

18

Japan Communist Party

20

0

20

26

Social Democratic Party of Japan

19

4

15

14

Minor Parties/Independents

21

21

0

15

Total

480

300

180

499

[1]These were the first lower house
elections under a new plan, enacted in January 2000, that
features 300 single-seat constituencies and 180 seats
awarded according to a party's proportional share of the
total vote.
[2]Previously, the lower house had 500 members: 300
represented single-seat constituencies and 200 were awarded
proportional-representation seats. Prime Minister Keizo
Obuchi's May 14 death created one vacancy.

Source: Kyodo Wire Service, June 26,
2000.

Moreover, even with postelection shifts in party affiliations, the
Liberal Democrats probably still will not command the simple majority
that they enjoyed in the last Diet. Their current deficit makes them
even more dependent on the support of their colleagues in the New
Komeito and the New Conservative Party. But those two groups also
incurred some not-insignificant losses. The strength of the New
Komeito and the New Conservative Party was reduced by 11 members
each. In contrast, the Democratic Party of Japan, the largest
opposition power, boosted its Diet presence by 32 members, while the
SDPJ and the Liberal Party upped their totals in the House of
Representatives by five seats and four seats, respectively (seeJEI Report No. 25B, June 30,
2000).

Coalition Instability

Critics who were disappointed that the lower house poll did not
upend the status quo-protective, LDP-led regime perversely may have
been cheered by postelectoral developments that suggested troubled
times ahead for the triparty union. In particular, the day after the
elections, Tokyo was rife with speculation that the New Komeito would
pull out of the alliance.

The leadership of the centrist party, which is backed by the
controversial Soka Gakkai Buddhist lay group, attributed its poor
showing in the June voting to problems with electoral cooperation
among the three ruling parties. In an effort to promote their unity
and the stable leadership that such cohesion would produce, the
coalition chiefs campaigned together, issued a common platform and
coordinated the single-seat races. Larger parties, which have bigger
war chests and deeper pools of candidates, generally have an
advantage over smaller parties in Japan's 300 winner-take-all
contests. With that in mind, the LDP did not field candidates in more
than a dozen single-seat districts and urged its supporters to vote
instead for the hopefuls backed by the New Komeito or the New
Conservative Party. Those parties likewise asked their members to
support the LDP choices in the races in which the two smaller parties
were not running candidates.

While this approach seemed fair in theory, it broke down in
practice. The New Komeito's notoriously disciplined 7.5 million Soka
Gakkai supporters appeared to follow the game plan with care,
awarding their votes to the 160 vetted LDP candidates. LDP
supporters, however, were not so accommodating. Exit polls revealed
that only 2 percent of Liberal Democrats voted as instructed in
contrast to the 50 percent of New Komeito loyalists who claimed to
have backed a LDP candidate.

Some pundits attributed this apparent
breakdown to LDP voters' distaste for the New Komeito's Soka Gakkai
support base.8 LDP-registered voters who did
not follow their party's orders to support a coalition contender no
doubt viewed the independent or the opposition-backed candidate as
the lesser of two evils. Such disobedience within the LDP ranks has
shaken the trust of the New Komeito and the New Conservative Party in
their senior partner. As a consequence, the stability of the second
Mori administration may be in jeopardy.

In fact, some commentators have suggested that if the New Komeito
does break away from the coalition, the LDP may have a harder time
courting a new partner. The disastrous attempt at triparty electoral
cooperation was watched closely by politicians of all persuasions.
They no doubt will be wary of joining forces with a group that could
not keep its promises to its allies.

Systemic Features

In addition to speculating about the longevity of the triparty
government, longtime observers of Japan's political scene continue to
wonder why and how the LDP and its partners fared as well as they
did, particularly in view of Mr. Mori's less-than-auspicious debut as
premier. Some pundits have proposed that inclement weather was part
of the reason since many people apparently preferred to stay home
rather than to brave the elements. About 60 percent of the electorate
cast ballots, a low turnout for a nation where it was not uncommon in
the 1980s for nearly 70 percent of voters to participate in national
elections. The LDP usually fares well in an atmosphere of ambivalence
because of its well-developed local get-out-the-vote machines. In
short, those who do vote tend to be Liberal Democratic loyalists.

Other experts argue, however, that the electoral system itself is
rigged to benefit the LDP. Gerrymandering has given disproportionate
weight to rural districts where the LDP leads in popularity. Liberal
Democrats count as one of their strongest support bases the farmers
whom they have attempted to protect from lower-cost foreign
competitors and aided through subsidies and preferential financing.
Indeed, in both the July 1998 upper house elections as well as in the
recent lower house poll, opposition-backed politicians were no match
for LDP candidates in single-seat races in rural districts.

In addition, the LDP is the only party that has sufficient
resources to field candidates in all 300 single-seat races. Six years
ago, the pro-reform government of Prime Minister Morihiro Hosokawa
gained legislative approval of a package of measures that
reconfigured the lower house electoral system and closed some
campaign-financing loopholes. The intent was to make elections more
policy-oriented as well as to allow for greater frequency in the
rotation of the party in power and to reduce the potential for
recurrent graft. The establishment of single-seat districts was a key
element of the plan. Ostensibly, the candidates of various parties
would distinguish themselves in voters' minds with their policy
differences rather than their personalities or their personal
largess, as was the case under the House of Representatives' old,
corruption-prone multiseat system.

The first elections under this plan 
held in October 1996 for the lower house  revealed that theory
did not necessarily equate with practice. Politicians remained just
as reliant on local support organizations and their own war chests to
win the single-seat races, and the LDP, with its formidable network
of grass-roots machines, continued to enjoy the upper
hand.9 Opposition parties conceivably could
pool their money and personnel and back a common candidate to take on
the LDP contender in a single-seat race. But, as the coalition's
experience in the June elections underscored, voters cannot be
counted on to cooperate to implement this strategy.

Moreover, by joining forces, opposition parties would not make the
most of the proportional-representation formula. The allocation of
200 lower house seats to parties based on their shares of the total
vote was another important element of the Hosokawa administration's
1994 reform package, included at the insistence of nonruling groups
to ensure that smaller parties would continue to have a voice in the
Diet.

Indicative of how important proportional representation is to the
political survival of non-LDP parties, the Obuchi government's
enactment in January 2000 of legislation cutting lower house
proportional representation by 20 seats nearly blew apart the
coalition. While the Liberal Party argued that such a change was
imperative in order to restructure the political system, leaders of
the New Komeito  more than half of whose Diet members had
earned their seat through proportional representation  fought
the proposal tooth and nail because of the losses their party would
incur (see JEI Report No. 5B,
February 4, 2000). Indeed, the New Komeito's 11-seat
reduction as a result of the June elections was due not just to
coordination problems with the LDP. It also reflected the simple fact
that fewer proportional-representation seats now are available to be
divvied up among smaller parties.

The important point, say political experts,
is that the LDP used its size and its strength to devise an electoral
strategy that would ensure its continued dominance in the Diet. In
the words of Richard Katz, senior editor of TheOriental
Economist Report, the current House of Representatives electoral
system is designed to divide the opposition vote in the important
single-seat races while enabling the LDP to win with a relatively
small share of the total vote.10 In the
single-seat races in June, the LDP gained only 40 percent of the
vote, yet it won 60 percent of the seats. In terms of proportional
representation, the LDP attracted just 29 percent of the vote, a mere
one point more than the DPJ.11

Opposition Shortcomings

As important as systemic features were in
deciding the June electoral outcome, the reality was that the
political opposition failed to provide a credible alternative to
continued LDP leadership. This shortcoming also handicapped non-LDP
parties in the 1996 lower house
elections,12 but opposition leaders seemed
to have learned nothing from that lesson. Despite the DPJ's
impressive 32-seat gain in the lower house, Nihon Keizai
Shimbun, the respected business daily, skewered the opposition
parties for missing "the big fish." Instead of uniting under one
umbrella and presenting voters with a well-conceived policy platform,
the Democratic-led opposition focused on attacking Mr. Mori's
qualifications, Nikkei charged.

The lack of coherence in the opposition's
policy prescriptions results in no small part from the diverse
positions of the nonruling parties. The four main non-LDP parties
embrace philosophies that range from the leftist, pacifist,
social-welfare focus of the SDPJ to the center-to-right views on
economics and defense-related matters held by some DPJ politicians.
As one expert has noted, the Democrats, like the Liberal Democrats,
are divided internally between pro- and anti-reform advocates. For
instance, the fall 1998 bailout plan for Japan's sinking banking
industry was the product of an alliance among younger, pro-reform
members of the LDP and the DPJ.13

The DPJ did go out on a limb with its plan
to lower the minimum taxable income for individuals, a proposal that
would increase the taxes paid by lower-income families. DPJ chief
Yukio Hatoyama argued that this move was a necessary "bitter
pill"14 that would enable Japan to begin to
pay down its enormous public debt. He also maintained that the
average voter would swallow it because of concerns about the economic
future and the uncertain impact of those woes on social security-type
benefits. The DPJ's impressive performance in the elections suggests
that voters may not have been repelled by the proposed tax hike.
However, the extent to which this idea  or an intense dislike
of Mr. Mori and the triparty government  influenced voting is
difficult to determine.15

Pundits also have argued that while Mr. Mori might be a walking
public relations disaster, Mr. Hatoyama does not possess sufficient
leadership skills or the charisma to inspire the electorate's
confidence that he would do a better job running the country than his
gaffe-prone competitor. American observers in Japan at the time of
the June lower house elections pointed out that Mr. Hatoyama was
untelegenic, to say the least, appearing anxious and distracted
rather than in command. The fact that the DPJ leader faced a tough
reelection fight in a single-seat Hokkaido district no doubt was one
of his worries. Mr. Hatoyama's narrow victory further called into
question his political strength.

Japan's disaffected but generally informed and
savvy electorate no doubt realize that Mr. Mori does not call
his own shots. LDP Secretary General Hiromu Nonaka and other senior
party officials basically are using him as a seat-warmer to ensure
leadership continuity through the late July summit on Okinawa of the
leaders of the Group of Seven industrial nations plus Russia. But to
a nation inherently averse to chaos and disruption, the better and
safer choice was to keep Mr. Mori  with his legion of
experienced advisers  as prime minister rather than take a
chance on Mr. Hatoyama. The DPJ chief once was described by former
Prime Minister Yasuhiro Nakasone as resembling soft ice cream 
"sweet and light" and lacking the toughness and the vision to lead
the nation. Voters may have concurred to some extent.

Caretaker Still Needed

Another development that seemed to defy
political logic was the decision by the LDP, the New Komeito and the
New Conservative Party to support Mr. Mori's reelection as prime
minister. He was so unpopular with party organizers that, according
to certain media reports, in the weeks leading up to the elections,
some officials went so far as to remove his picture from local LDP
headquarters. Indeed, their fears of Mr. Mori's negative effects on
LDP candidates running in single-seat races were borne out since LDP
candidates won in only 25 of the 76 districts in which Mr. Mori
stumped.16 In the wake of their drubbing at
the polls, the New Komeito and the New Conservative Party presumably
have no abiding affection for the LDP chief, either.

Yet the day after the elections, senior LDP
officials and leaders of the New Komeito and the New Conservative
Party endorsed Mr. Mori's reelection. The prime minister also
received crucial backing from the LDP
factions17 headed by former LDP Secretary
General Koichi Kato and former LDP policy chief Taku Yamasaki. Both
of them had made politically imprudent and ultimately unsuccessful
bids to seize the LDP presidency from Mr. Obuchi in September 1999
(seeJEI Report
No. 36B, September 24, 1999). Since then, they have had
at best uneasy relationships with Mr. Mori, Mr. Nonaka and other
old-guard politicians. With the three parties' absolute majority in
the lower house, Mr. Mori was reelected easily on the first day of a
short special Diet session convened in early July for the express
purpose of formally selecting a new prime minister and naming a new
government (seeJEI Report No. 27B,
July 14, 2000).

In trying to make sense of the coalition's decision to keep an
individual of questionable competency in the nation's highest elected
office, experts suggest that LDP elders may have been motivated by
pragmatic concerns. In late April and early May, Mr. Mori made a
whirlwind nine-day tour of the G-8 nations, ostensibly to ensure that
all participants will be on the same page when they convene on
Okinawa in late July (see JEI Report
No. 19B, May 12, 2000). Having laid that
groundwork, it made sense from a diplomatic standpoint that Mr. Mori
should be reelected so that he could serve as the summit host.
Proponents of the seat-warmer theory predict that the prime minister
will be more vulnerable to an ouster after the G-8 gathering,
however.

Other insiders suggest that Mr. Mori was retained as LDP president
and prime minister for internal party reasons. Unlike Messrs. Kato
and Yamasaki, the former LDP secretary general had been loyal to his
predecessor, a trait highly valued by LDP doyens. Mr. Nonaka, who
served as the late premier's "shadow shogun" and who possesses
political clout rivaling that of the faction chiefs, also may have
wanted a status quo-oriented politician whom he could control.

Mr. Kato, in particular, was highly critical of the Obuchi
government's reliance on stimulus to get the economy moving. The
leader of the third-largest faction also is more comfortable with and
interested in matters of diplomacy and national security than Mr.
Nonaka. The LDP's second-in-command apparently was worried that
installing a reform-minded heavyweight like Mr. Kato as prime
minister would fracture the party, possibly leading Messrs. Kato and
Yamasaki to form an alliance with the DPJ. Such a move might leave
Mr. Nonaka and the change-resistant old guard of the LDP in the
minority.

Foreign Minister Yohei Kono was another possible contender. But
his election as LDP president and prime minister might have proved
just as disruptive. Messrs. Kato and Yamasaki had hinted that they
would bolt should Mr. Kono be tapped to lead the party.

Other analysts have put forward yet another explanation for Mr.
Mori's reelection. In the wake of the deaths earlier this year of
politicians who epitomized old-line LDP politics with its emphasis on
pork-barrel spending, collusive ties with business executives and
bureaucrats and seniority-based leadership  namely, Mr. Obuchi,
former Prime Minister Noboru Takeshita and former LDP Secretary
General Seiroku Kajiyama  Mr. Nonaka may have viewed Mr. Mori
as his last chance to retain traditional party practices. In recent
years, younger LDP members have been champing at the bit to reform
party operations to facilitate the development of policies more
responsive to the changing needs of the electorate. Having cut their
political teeth under the old system and amassed power by
understanding its ins and outs, Mr. Nonaka and others of his
generation understandably are reluctant to let go of a party
structure and process that have served them well.

Forces For Change Build Under Surface

Although the LDP and its governing partners remain in power, the
outcome of the June lower house elections confirms that the factors
behind the ruling party's trouncing in the July 1998 upper house poll
were not onetime phenomena. Forces for change, which, over time, will
transform the political landscape, continue to build under the
surface. But, as one analyst described the situation, "[w]hile the
'old regime' is dying, there is not yet a 'new regime' to replace
it."18

Rural/Urban Split

The most notable trend has been a split between rural and urban
constituencies. The elections left no doubt that the rural community
continues to represent the LDP's strongest bloc of support. This
constituency has no reason to back a candidate from a party that has
not  as the LDP has  provided generous protection for
farmers or raised living standards in certain backwater areas through
a steady stream of public works projects.

City dwellers, not surprisingly, have a different view of the
LDP-led government. As in the July 1998 upper house contests, LDP
candidates took a beating in urban areas, where the largest
concentrations of nonaligned voters are located. In Tokyo, for
example, DPJ candidates won more than half of the 25 single-seat
races  unseating International Trade and Industry Minister
Takashi Fukaya in the process. Agriculture, Forestry and Fisheries
Minister Tokuichiro Tamazawa also lost his bid to continue to
represent a district that includes metropolitan areas in Iwate
prefecture.

Analysts attributed these losses to frustration among urbanites at
seeing the lion's share of the government's whopping pump-priming
packages going to finance infrastructure in the hinterlands.
Moreover, city residents have come to resent the powers-that-be for
saddling the nation with a crushing public debt simply to ensure
their reelection. Despite demographic data suggesting that Japan is
becoming increasingly urbanized as more and more children of farm
families migrate to cities, the LDP has refused to shut off the valve
of public funds and other assistance to its longtime backers in the
agricultural sector or to those in the construction business.

Business Divisions

The nation's decade-long stagnation and a
fast-changing global economy also have created conflicts of interests
within corporate Japan. The policy consensus within the business
community  another longtime bastion of LDP support  has
eroded as the demand for information and action exceeds what the
formerly cozy relationship among the LDP, the corporate world and the
bureaucracy can provide in a timely manner. Given the vastly
different needs of contractors, "old economy" manufacturers and
mom-and-pop retailers and the technology-driven firms that constitute
the "new economy," the catchall LDP strategy that once protected the
interests of everyone no longer is
workable.19

That has not stopped the ruling party's old
guard from trying to be everything to everyone, however. The LDP-led
government has attempted to buffer the inevitable pains created by
economic restructuring by encouraging the conditions for some
corporate changes while simultaneously maintaining policies aimed at
softening the blows in politically important but economically
inefficient and vulnerable sectors.20
Earlier this year, for example, the Obuchi administration extended
the deadline for ending unlimited bank deposit insurance protection,
thereby reducing the threat of weaker banks losing business,
collapsing or being forced to merge (see JEI
Report No. 2B, January 14, 2000).

Moreover, notwithstanding Mr. Mori's pledge to make the advance of
information technology a centerpiece of his new administration, the
coalition has obstructed initiatives that would allow that broadly
but poorly defined industry to flourish. Most notably, the government
has resisted pressure from both domestic and foreign communications
carriers to loosen the market grip of Nippon Telegraph and Telephone
Corp. Tokyo's standpat position has made Internet access and other
communications services far more expensive than in the United States
and Europe and, consequently, has slowed the promised IT revolution.
It also has embroiled Japan in a long-running trade dispute with the
United States (see JEI Report
No. 26B, July 7, 2000).

Due to its go-slow approach to deregulation and restructuring, the
LDP has begun to alienate the very business constituencies that could
serve as engines for Japan's recovery. Not surprisingly,
corporate
political contributions have sagged in the past six years, in part
because of the private sector's rising disillusionment with the LDP's
inability to address its more diverse agenda.

Corporate Japan's divergent interests and
needs also have created competing camps within the LDP. Earlier this
year, 180 party legislators formed a caucus to fight deregulation
initiatives that would hurt their support bases. As the regular Diet
session for 2000 drew to a close, this group managed to water down
several proposals that would have threatened small retailers, taxi
operators and the medical industry.21

Although he is the most notable member of the anti-reform caucus,
Mr. Mori has vowed in his two major policy addresses to date to
pursue bold structural reforms. However, with Mr. Nonaka 
another anti-reformer  pulling Mr. Mori's strings, not a few
pundits have scoffed at the prime minister's rhetoric.

Generational Gap

Younger LDP members share the critics' skepticism concerning the
old guard's response to Japan's economic crisis. Barely two weeks
after the lower house poll, 42 Liberal Democrats, who mostly are in
the 30-to-40-year-old age bracket, banded together as Jiminto no
Asuotsukuru Kai (The Group to Create the LDP of Tomorrow). These
insurgents object to Mr. Mori's leadership, arguing that he is
underqualified for such a demanding position. They also have blasted
the prime minister and Mr. Nonaka for relying primarily on seniority
and factional strength to select the members of the new cabinet (see
Table 3), whom one of Japan's major dailies described as being
nothing more than "aging time-servers without clear policy goals."

The Young Turks have demanded Mr. Mori's resignation. Sounding
more like reformers from the opposition than LDP up-and-comers, they
also have argued that their party will not survive if it sticks to
its current soft-landing policies. The group, which includes the
progeny of such revered  if controversial  figures as
Messrs. Tanaka and Kono and Tokyo Gov. Shintaro Ishihara, has vowed
to field its own candidate in the next LDP presidential election.

According to founding member Nobuaki Ishihara, the group will
focus on "changing the structure and the nature of the LDP rather
than getting LDP leaders to overhaul the party." Mr. Ishihara and his
like-minded colleagues either have not considered  or are not
ready to consider  that changing the structure and the nature
of the ruling party is tantamount to overhauling the LDP, and that
this process inevitably will involve making difficult policy choices
that affect key support groups.

Therein lies the dilemma. If the proponents
of change gain the upper hand, the LDP will splinter, but the party
also will fall apart if the keepers of the status quo prevail. Either
way, huge blocs of voters and campaign contributors will be
alienated. That is why the LDP often appears confused and without
direction in the deregulation/restructuring debate and seems capable
of only incremental changes.22 In short,
the LDP is being pulled in opposite directions.

This quandary will not be resolved by the Mori government, the
Young Turks or anyone else in Japan in the near term. Political
analysts say that it will take several more years and at least one
more round of lower house elections before the catchall party truly
is modernized.

Near-Term Challenges Could Destabilize
Coalition

As if the pressures for change were not troublesome enough for an
anti-reform politician, Mr. Mori is likely to face several tests in
the coming months that also could prove to be his undoing. His shaky
governing arrangement could fall apart for any number of reasons
relating to politics, policies or developments beyond its control.

New Komeito Wavers

The New Komeito may be pressured by its membership to pull out of
the coalition in order to rebuild its battered support base. At the
very least, the party may drive a harder bargain on social welfare
and security-related policies as a way of differentiating itself from
the LDP.

But while the LDP now is even more dependent on the New Komeito to
maintain a majority in the lower house, some members of the larger
party  specifically those who regard the New Komeito's Soka
Gakkai affiliation as anathema  may seize on the group's
distancing tactics as an excuse to shove it out the door. That move,
in turn, could rupture the LDP and possibly provide a window of
opportunity for Mr. Kato to forge an alliance with the DPJ. Depending
on how many defectors the former LDP secretary general took with him,
such a union might enable the Democrats to assume control of the
government as part of a new coalition.

Wakachiku Scandal

The late June arrest of former Construction Minister Eiichi Nakao
on suspicion of receiving ¥30 million ($272,700 at
¥110=$1.00) in bribes from Tokyo-based Wakachiku Construction
Co., Ltd. while in office four years ago also could become a
political hot potato for the Mori administration. If the
investigation reveals that other prominent LDP officials were on the
take, the prime minister may be forced to resign to accept
responsibility for the scandal, just as Mr. Takeshita was unseated
when the Recruit Co., Ltd. affair blew up in the late 1980s.

Moreover, through his clumsy handling of the selection process for
a Construction minister in his new cabinet, Mr. Mori not only focused
greater attention on the Wakachiku scandal, but also provided the
political opposition with additional ammunition to attack his fitness
for office. Mr. Nonaka, who, for all intents and purposes, chose the
members of the second Mori cabinet, was said initially to have
favored Tadamori Oshima for the Ministry of Construction post. But
when Mr. Oshima declined the offer  as did everyone else
approached by the LDP secretary general in the wake of Mr. Nakao's
arrest  Mr. Nonaka offered the position to New Conservative
Party leader Chikage Ogi, ostensibly because female politicians are
perceived as being less preoccupied with money and not as tempted by
graft as their male counterparts.

Although Ms. Ogi took the job, she was not
shy about voicing her disappointment at being passed over for her
first choice, Education minister  a position that eventually
went to Mr. Oshima  or her recognition of Mr. Nonaka's ulterior
motives. "I may have been used to erase the public's suspicions
[about the graft associated with public works projects]," she told
reporters.23 Some observers also heard in
her remarks the seeds of discontent that could create frictions in
the LDP's relations with the New Conservative Party.

G-8 Summit

The ink on the final communique for the June 1999 G-8 summit in
Cologne, Germany was barely dry when Japanese officials began
planning for this year's late July gathering on Okinawa. For months,
Tokyo has been obsessed with ensuring the summit's success.
Policymakers apparently define a "successful" summit as one at which
there are no crippling public demonstrations like those at last
fall's abortive World Trade Organization meetings in Seattle (see
JEI Report No. 46B,
December 10, 1999), no outstanding economic or political
dispute between Japan and any of the other summit participants and no
embarrassing remarks by Mr. Mori.

Summit planners in Japan obviously have no guaranteed protection
against any one or all of these situations developing. Mr. Mori has
proved himself to be a wild card at the podium, but he laid some
important diplomatic groundwork for the G-8 sessions during his
meetings with all of the participating leaders this spring. However,
two events have occurred in July that no one could have anticipated,
much less planned for preemptively.

U.S. military forces in Japan have a public relations nightmare on
their hands. A 19-year-old Marine based at the Futenma Air Station on
Okinawa was arrested at mid-month for allegedly breaking into a local
residence and molesting an adolescent girl while she was sleeping. On
the heels of that episode, a 21-year-old Air Force staff sergeant
also stationed on Okinawa was arrested on suspicion of injuring a man
in a hit-and-run accident. The two incidents epitomize the problems
and the abuses with which Okinawans have had to contend as hosts to
the largest concentration of Japan-based U.S. forces.

Five years ago, the rape of an Okinawan schoolgirl by three U.S.
servicemen sparked a virulent anti-base outcry in Japan. The
bilateral Special Action Committee on Okinawa conducted a
comprehensive review of the U.S. base presence in the southernmost
prefecture. This inquiry culminated in recommendations to consolidate
facilities, alter intrusive training procedures and move certain
personnel and equipment to military facilities on the main island of
Honshu. However, full implementation of the proposed base
consolidation on Okinawa  principally, the relocation of a
heliport at the Futenma base  has been impaired by residents'
still-strong opposition to having American military staff and
hardware literally in their backyards.

Last summer, President Clinton turned up
the heat on American and Japanese negotiators to find a solution to
the Futenma heliport controversy by urging that the matter be
resolved before the G-8 summit. The Obuchi administration added to
the pressure by selecting Nago, a town on the northern end of the
main Okinawan island, to host the G-8 affair. Its choice was all the
more significant because Nago has been actively considered as the
site for a new civilian-military airfield that also would house the
Marine heliport.24

Notwithstanding months of intense discussion between both
Washington and Tokyo and Tokyo and the Okinawan capital, Naha, by
mid-July, American and Japanese negotiators still had not broken the
logjam that had developed over the terms governing the use of the
prospective Nago airport. Nor was it clear whether residents of the
seaside town supported the project.

As it is, Japanese officials worry that Nago residents and other
anti-base agitators on Okinawa will try to disrupt the summit. These
concerns were amplified by a 5,000-person rally on Okinawa barely a
week before the arrival of the heads of government to protest
the incidents of criminal behavior alleged of the two U.S.
servicemen. Mr. Mori, of course, neither said nor did anything to
incite the demonstrators, but he nevertheless will be held
responsible if a similar event interrupts the G-8 proceedings or
otherwise overshadows the meetings. That certainly is not the note on
which Mr. Nonaka or other LDP strategists want to begin the second
Mori term.

The other event threatening a successful G-8 summit is the
stalemate between the United States and Japan over the depth and the
timing of the cuts that NTT's two regional operating units will make
in the fees that they charge other carriers to use their networks to
move voice and data traffic between local switching centers and homes
and businesses. Neither Washington nor Tokyo wants this dispute to
distract from the gathering's focus on the worldwide development of
the IT industry and other big-picture issues. However, absent an
agreement by the time of the summit, Japan quickly could find itself
the subject of a U.S.-initiated WTO complaint.

Sogo Collapse

The opposition parties seized on the late June decision by the
government to bail out Sogo Co., Ltd., a second-tier department store
operator crippled by more than ¥1.7 trillion ($15.5 billion) in
unpaid bills, as further evidence that the LDP intends to protect its
friends  even if that means setting an extremely expensive
precedent. DPJ charges that this controversial action was yet another
example of how the Mori administration was backsliding on its
promises of reform hit a responsive chord with the many people
already anxious about their future finances.

Although the LDP reversed course on the bailout, forcing Sogo to
file for protection from its creditors in bankruptcy court (seeJEI Report No. 28B, July 21,
2000), the Mori government is not off the hook. Some analysts
agree with the initial thinking of both bureaucrats and LDP
politicians that the retailer's collapse could have a ripple effect
on the economy because of the large number of suppliers that could
take a hit if the department store closed its doors. In other words,
LDP policymakers again could face the choice of making their stalwart
supporters in the construction, financial and retail industries pay
the price for their poor management practices or enabling an easier
restructuring.

Governmental Reorganization

A sweeping reorganization of the government that will slash the
number of ministries and agencies to 13 from 22 is scheduled to be
implemented in January 2001 (see
JEI Report
No. 27B, July 16, 1999). Like the 1994 political reform
initiative, this plan is designed to eliminate the excesses of
Japan's relatively closed, state-dominated system. At least according
to proponents of administrative reform, rearranging and streamlining
the bureaucracies will create a more responsive and capable
government, one that no longer burdens the private sector with myriad
regulations and other competitive constraints.

It is precisely because of the pending government reorganization
that the second Mori cabinet has been perceived as a transitional
team. Although the prime minister and Mr. Nonaka were lambasted for
awarding cabinet posts based on factional strength, some political
experts suggest that such an approach actually may serve a
longer-term political purpose. In this view, the LDP chieftains may
have seen the recent cabinet appointments as a last chance to pay
back political debts or to develop IOUs; those, in turn, may be
crucial given the many challenges ahead. Then again, the factional
approach might have been just a reflexive response.

If Mr. Mori lasts until January and if he again appears to rely on
intraparty politics to determine the makeup of his new, smaller
cabinet, the prime minister undoubtedly will face severe criticism
for trying to defeat the broader purpose of systemic reform. Against
such a backdrop, the opposition parties might be able to mount a
no-confidence vote that would force out the LDP chief. But if Mr.
Mori ignores factional politics and pressures, he also could
jeopardize his leadership position.

Outlook: Gradual Change Continues

Pressure to change the old ways of doing things will dog Mr. Mori
at least until the July 2001 upper house elections  assuming
that he lasts that long. If political developments, international
crises or the prime minister's perceived incompetence do not bring
him down before then, those elections, most experts say, will be his
next crucial test. Based on voter trends apparent in the July 1998
upper house elections and in June's lower house poll, the electorate
probably will continue to express its dissatisfaction with the LDP
leadership by chipping away at the party's presence in the House of
Councillors.

Even if the LDP loses big in these elections, it still will rule
Japan  that is, assuming it can maintain a governing alliance
that gives it and its partners a majority in the more powerful House
of Representatives. If the New Komeito does bolt, the LDP will be
forced to woo independents and DPJ defectors to cobble together
another majority. More likely, though, the departure of the
Buddhist-backed party will rupture the LDP. A coalition between the
DPJ and the Kato and Yamasaki factions then might be possible.

In any event, Mr. Mori has not impressed anyone as a proponent of
change. His government probably will try to get away with as little
as possible in the way of economic reform. However, until the
political opposition can offer a compelling alternative, voters
 no matter how angry and frustrated they may be with the LDP
 are unlikely to throw the bums out. Thus, muddling
through will continue to be the name of the game in Japan 
certainly politically but possibly also on the economic front.

The views expressed in this report are those of the
author
and do not necessarily represent those of the Japan Economic
Institute

1aa From
November 1996 to July 1998, the government of Prime Minister Ryutaro
Hashimoto was composed of the LDP, the SDPJ and the New Sakigake
Party. Keizo Obuchi succeeded Mr. Hashimoto in July 1998 with a LDP
administration that initially ruled on its own. In January 1999,
however, the LDP joined hands with the Liberal Party. Ten months
later, Mr. Obuchi broadened the coalition by bringing the New Komeito
aboard. In early April 2000, the Liberal Party formally split from
the government. Liberal Party members who preferred to remain aligned
with the LDP and the New Komeito rejoined the coalition as the New
Conservative Party. Prime Minister Yoshiro Mori, elected in early
April to succeed a gravely ill Mr. Obuchi, inherited the LDP-New
Komeito-New Conservative Party governing arrangement.
Return to Text

6aa Mr.
Obuchi died May 14, 2000, having never regained full
consciousness following his April 1 stroke.
Return to Text

7aa The
June 25 lower house elections were the first under a new plan,
enacted in January 2000, that features 300 single-seat districts and
180 seats awarded according to a party's proportional share of the
total vote. Previously, the lower house had 500 members; 300
represented single-seat constituencies, and 200 held
proportional-representation seats. Return to
Text

8aa The LDP
garners the most support among the nation's religious organizations
from members of Shinto groups and other followers of Buddhism, who
reject Soka Gakkai's dogma and object strongly to its strong-arm
recruiting tactics. These groups vigorously oppose the New Komeito's
participation in the coalition, arguing that it gives Soka Gakkai a
de facto seat at the governing table. That, in turn, it is argued,
violates the constitution's separation of church and state.
Return to Text

17aa The LDP
factions are intraparty power centers whose purpose is to further the
political and leadership aspirations of their members. These groups
rally under the names of Mr. Mori, the late Mr. Obuchi, former LDP
Secretary General Koichi Kato, former LDP policy chief Taku Yamasaki,
former LDP President Yohei Kono and the late Yoshio Komoto. A seventh
faction is led jointly by Takami Eto and Shizuka Kamei.
Return to Text